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Higher education exports and household consumption: evidence from China

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Abstract

As a result of the expansion of higher education exports, the number of international students in China increased from 44,711 in 1999 to 492,185 in 2018, with an average yearly growth rate of 14%. This paper investigates whether the export of higher education improves households’ well-being in China. Specifically, we study if there is a causal relationship between higher education exports and household consumption. Using a shift-share instrumental variable approach, we find that a one percent increase in educational exports (measured as the number of international students) increased household consumption by around 0.06%. The results indicate that growth in income/wealth is an important channel that promotes household consumption. Furthermore, we find that education exports mainly affect household developmental consumption, especially housing and education consumption. We also find that the promotion effect of education export on household consumption is not driven by tuition fees alone. Finally, a vital conclusion of our work is that education exports not only can bring more trade benefits but also can relieve the negative consequences of the low household consumption rate in China.

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Fig. 1

Source: IIE/Project Atlas

Fig. 2

Source: Ministry of Education of the People’s Republic of China

Fig. 3

Source: Ministry of Education of the People’s Republic of China

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Notes

  1. Here “externality” and “exogeneity” refer to “the instrument is not caused by variables in the outcome equation” and “validity of the IV exclusion restriction” respectively.

  2. Saiz (2007) proposed an alternative IV approach which can relax the second assumption and consist in estimating annual immigration inflows by country and year. However, due to the lack of the source country information of international student, we are not able to build this kind of instrument in this study, even so we still believe that this assumption is somewhat close to reality.

  3. The CFPS is sponsored by the Chinese government through Peking University. CFPS implemented its baseline survey in 2010 and four waves of full sample follow-up surveys in 2012, 2014, 2016, and 2018, we do not use the 2018 wave since some variables in the 2018 database have changed, and we have the international students data until 2017.

  4. The CFPS baseline survey interviewed a total of 14,960 households and 42,590 individuals, which covers 25 provinces/municipalities/autonomous regions, representing 95% of the Chinese population.

  5. According to the definition of the National Bureau of Statistics, consumer expenditure includes eight major items including food, clothing, household equipment and services, medical care, transportation and communications, entertainment, education and cultural services, housing, miscellaneous goods and services.

  6. Here food refers to expenditures on food, dress refers to expenditures on clothing, house refers to expenditures on housing, daily refers to expenditures on family equipment and daily necessities, medical refers to expenditures on medical and fitness, education refers to expenditures on education and entertainment, transportation refers to expenditures on communication and transportation, and other refers to other expenditure on consumption.

  7. The annual statistical data of international students in China consists of three parts: students who graduated that year, new students who come to China that year, and students who continue to study.

  8. We choose the variable of net family income which is compared with the year 2010 in every database.

  9. The nominal interest rate refers to the official 1-year savings deposit interest rate (Wan et al., 2001).

  10. According to Engel’s Law, as family income increases, the percentage spent on food decreases, that spend on clothing, heat, and light remains may be the same, while that spent on education and recreation increases. From the results of Table 3, we can see that with income growth, the household consumption on food, dress, medical, and daily didn’t change, while the consumption on housing, education, and transportation significantly increased. Therefore, we think these results follow Engel’s Law.

  11. The Chinese government established the Chinese government scholarship policy in the 1950s to subsidize students and scholars from all over the world to study and research in Chinese universities. The Ministry of Education of the People’s Republic of China entrusts the Management Committee of China Scholarship Council to be responsible for enrollment and management of Chinese government scholarship programs. Chinese government scholarships are divided into undergraduate scholarships, postgraduate scholarships, doctoral scholarships, scholarships for Chinese language learners, scholarships for generally advanced learners, and scholarships for advanced learners. Chinese government scholarships are divided into full scholarships and partial scholarships. Full scholarships include tuition reduction and exemption, accommodation fee exemption, fixed monthly living allowance, and public medical services equivalent to Chinese students, etc., and partial scholarships cover one of the full scholarships Or a few items. https://www.chinesescholarshipcouncil.com/.

  12. Advanced scholars refer to international students who have a master’s degree or above and come to China for further studies on a particular topic. General scholars refer to international students who have a sophomore degree or above in China for advanced studies. Language advanced students refer to the international students whose purpose is studying and improving the Chinese language proficiency. Short-term students refer to those who study in China for less than one semester.

  13. We also directly apply income data from CFPS to retest our mechanism. Specifically, we apply total family income and family salary income two variables, total family income can measure household income, and family salary income is a subcomponent of the household income. We report the results in Table A1.

  14. Here housing price refers to average selling price of commercial housing, the unit is yuan/square meter. Data source: National Bureau of Statistics of China.

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Funding

This study was funded by Jiangsu Province Social Science Fund, 23JYB011, Yuanyuan Gu, the General Project of Philosophy and Social Science Research in Colleges and Universities in Jiangsu Province, 2022SJYB0167, Yuanyuan Gu, Startup Foundation for Introducing Talent of Nan**g University of Information Science and Technology, 2022r066, Yuanyuan Gu.

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Authors and Affiliations

  1. Research Institute for Environment and Health, Nan**g University of Information Science and Technology, Nan**g, 210044, Jiangsu, China

    Yuanyuan Gu

  2. School of Business, Nan**g University of Information Science and Technology, Nan**g, 210044, Jiangsu, China

    Yuanyuan Gu

  3. Banco de la República, 130001, Cartagena, Colombia

    Jhorland Ayala García

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  1. Yuanyuan Gu
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Correspondence to Yuanyuan Gu.

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Appendix

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Table A1 Mechanisms test
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Gu, Y., García, J.A. Higher education exports and household consumption: evidence from China. Asia Pacific Educ. Rev. (2024). https://doi.org/10.1007/s12564-024-09932-x

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